5/5 (1)

Commercial transactions have taken place for centuries, but currently there is a revolution happening that is transforming the market. This transformation is occurring due to the relationship between organizations and consumers being increasingly facilitated through electronic information technology. This is generally referred to as e-commerce, its major component being electronic markets.

In the last couple of years, e-commerce competition has been fierce. Companies must innovate not only their products, but also their business models if they hope to keep up with the ever changing circumstances. Here we compare Alibaba.com, the giant wholesale, cross-border marketplace to Amazon, the largest retailer in the world.

Let’s start with Alibaba, whose story started indeed like a fairy tale, and has become one of the most valuable companies of the world today. The Alibaba Group, or just ‘Alibaba’, is a Chinese internet conglomerate that includes China’s largest B2B e-commerce site, Alibaba.com and the largest C2C marketplace in China, Taobao Marketplace. In addition to its e-commerce businesses, the company has also expanded into cloud computing, mobile chat & financial services just like Amazon.

A few years earlier, in 1994, there was another company pioneering in ecommerce – Amazon. Today it is an online platform with 329 distribution centres worldwide. They have a heavy focus on customer satisfaction and sell a wide variety of products.

Alibaba.com focuses on connecting the suppliers with consumers, removing any ‘middle man’, and their profit requirement, which ultimately results in cheap prices. Amazon, however, puts a lot of emphasis on its services and has also been focusing on media streaming and B2B services. While Amazon sets up delivery centres overseas to deliver only to locations it chooses, Alibaba uses its logistics service for 11 countries and then outsources delivery for the rest of the world. The reason why Alibaba.com was able to become a global marketplace is that it does not own the products it sells. There is no need for having a single physical store or warehouse, which provides competitive advantage through cost saving.

What are the strengths and weaknesses of these business models?

It is no secret that Alibaba’s biggest one is sheer price advantage. Amazon, on the other hand, has been continuously perfecting and optimising its services and increasing the range of its products in order to ensure customer satisfaction and building a strong brand. Nevertheless, presentation of the items sold on Alibaba is usually inferior to a complete product listing. Sometimes consumers have to wait very long until they receive their item even if it is in stock and although a ratings system is in place, consumers are less willing to trust companies whose names they don’t recognise. Amazon suffers from a strict organisational culture and an incredibly high rate of employee turnover as a consequence. This may be the company’s biggest weakness, since it relies heavily on human resources.

Finally, let’s talk about the future trends in the ecommerce industry that should serve as directives for both firms in order to expand as well as protect their current market positions.

• Smartphone revenues will overtake desktop revenues and mobile payment and loyalty programs will become new norms
• Beacon technology will drive more retail sales
• Predictive analytics and increasing location accuracy will increase business margins
• User generated content will be refined by advanced personalization and customer centric technology
• Omnichannel will overtake traditional ones
• Same day delivery will be the norm

Our video contains an in-depth analysis of the two companies in respect to Porter’s five forces, check it out if you are interested!

 

Jahnavi Ghelani, Zoltán Szilassy, Andrei Letcanu, Balázs Harza (Group 85)

5/5 (3)

Driverless cars could be the smartphone of the future, or at least it seems that this is what Apple is banking on. One thing is for sure: Apple, Inc. wants a piece of the automotive pie. Since the company has amassed overseas reserves of over $210 billion over the years, it can afford spending on expensive projects.

Courtesy of Steve Jobs, Apple has always been very secretive of its projects, which is why nobody knows what is going on with the company’s latest one, dubbed Titan. It has worked out well in the past to withhold information about its products from the general public, sales of previous iPhones have proven so. Being able to surprise consumers with theatrical unveilings emphasizes the unique role of Apple on the market. But where do you draw the line between giving it the benefit of the doubt and putting its shareholders at an informational disadvantage?

There is a very blurry line between facts and speculation when it comes to Apple.

Let’s see what we know so far:

• The project is said to be scheduled for release in 2020.
• Some 1,000 engineers are working on Project Titan.
• R&D spending has been tripled compared to last year to $9.7bn this year.
• Apple has registered a number of domains such as apple.car, apple.cars and apple.auto.
• The company is hiring engineers with automotive background and poaching car experts from Tesla, BMW and Ford.
• Several locations of interest include a secret lab in Berlin, another one in Vienna, a former Pepsi bottling plant in Sunnyvale, CA and an Irish plant in Cork that received a €300 million investment in 2014.
• BMW and Daimler have refused an offer to work together on the project.
• A partnership between the company and a South Korean battery maker was made.
• The company has 10 technology patents regarding a self-driving platform.
• Apple has expressed interest in testing at GoMentum, a testing facility used by Tesla and Google.

Regardless of the fact that the software was not responsible for any of the fatalities, news of people dying in self-driving cars are casting a shadow over the concept. Needless to say, there are ethical and legislative issues involved, but we still have a couple of years to go. The fact that Tesla is having quality and production issues despite being the best electric automaker further supports the notion that there is still a lot of development to do. Nevertheless, Google has been very busy with patenting its work and working closely with authorities to ensure there are no contradictions – something Apple should be doing too.

There are a couple of reasons why it might look unwise for Apple to attempt to enter the automotive industry. First of all, the company has completely outsourced manufacturing of its products and therefore has no experience in the field whatsoever. Traditional automakers have a huge lead here, it’s highly unlikely that Apple will be able to catch up, although the arrival of Chris Porritt, Tesla’s former VP of vehicle engineering, David Masiukiewicz, Tesla’s former senior CNC programmer for hardware prototypes, and Kevin Harvey, Andretti Autosport’s former CNC machine shop supervisor might offset some of the disadvantage. In fact, Apple has poached so many car experts from Tesla that Elon Musk calls it the ‘Tesla Graveyard’. Moreover, the electric car industry is currently not profitable (Tesla, the leader of the market is losing 23% on each and every car it sells), and everyone who has been paying attention to the IT world knows that Apple is not a charity organisation (see AirPod). In addition, it’s hard to see why it would make a better autonomous vehicle than traditional automakers or Tesla. Daimler CEO Dieter Zetsche put it like this: ‘If there were a rumour that Mercedes or Daimler planned to start building smartphones then [Apple] would not be sleepless at night.’

We must also remember that the company won’t be able to retain the attractive profit margins it previously enjoyed. Apple will be forced to surrender its current rate of 18% and price its car according to the industry average of 5% if it wants to offer competitive prices. Most large automakers are earning percentages similar to the industry average (General Motors: 7%, Daimler: 6%, BMW: 8%, Volkswagen: 2%, Toyota: 8%, Ford: 5%).

Car manufacturing requires an incredibly complex supply chain. Since the automotive industry is quite old, these supply chains are overlapping with business networks – business networks that Apple cannot buy its way into. They are not just a matter of money, but the result of years and years of partnership and close cooperation. Automakers even have the option to put pressure on their suppliers to discourage them from partnering with Apple.

There is reason to believe that the project changed direction when former head of Blackberry’s automotive software division Steve Zadesky was replaced by long-time Apple executive Bob Mansfield earlier this year. Simultaneously, the company also let go of some of its engineers. It now seems that Apple abandoned the original goal of making an entire car, a somewhat greedy and risky idea in the first place. This change of direction might make it easier for the company to monetise its product, since potential partners would be more likely to cooperate if the threat of a potential competitor ceases to exist.

The engineers are focused on developing a platform instead – this would enable the company to supply the tech to a new electric, self-driving car made by someone else. However, when attempting to go down this road, both BMW and Daimler quickly showed Apple the door, making it very clear that they are currently not interested in a partnership.

An emphasis on connectivity and modularity of the platform should further increase the marketability of the product. Apple is playing on home ground when it comes to connectivity and needs to make up for the lack of experience in other fields anyway. Offering an advanced self-driving platform with great connectivity capabilities could be a crucial bargaining chip when negotiating with possible future partners.

All in all, the obstacles on the road towards an iCar seem insurmountable. A lot can happen in 4 years, so it might be too early to go digging graves, though. Supplying some of the tech to the car could be a middle ground that automakers accept. Nevertheless, it would be very convenient for car manufacturers to shop for auto parts and company phones from the same vendor.

What is your opinion about Apple’s car plans? What do you think the correct direction would be?

 

References:

https://www.bloomberg.com/gadfly/articles/2016-09-21/apple-needs-to-lift-the-hood-on-its-auto-ambitions

https://global.handelsblatt.com/breaking/exclusive-bmw-daimler-reject-cooperation-with-apple-over-icar

http://www.techinsider.io/apple-leases-pepsi-property-sunnyvale-california-project-titan-electric-car-2016-3

http://www.faz.net/aktuell/wirtschaft/netzwirtschaft/apple-steve-jobs/apple-icar-entwicklung-in-geheimem-autolabor-in-berlin-14183854.html

http://www.macrumors.com/2016/01/08/apple-car-cars-auto-domains/

http://english.etnews.com/20160809200001

http://www.businessinsider.com/bob-mansfield-to-lead-apple-car-project-2016-7

http://www.techinsider.io/apple-hiring-people-with-car-experience-2016-4

http://www.bloomberg.com/news/articles/2016-07-28/apple-taps-blackberry-talent-as-car-project-takes-software-turn

http://www.businessinsider.com/apple-steve-zadesky-quits-2016-1

http://www.bizjournals.com/sanjose/news/2016/03/01/apple-leases-old-pepsi-bottling-plant-in-sunnyvale.html?ana=twt

http://www.independent.ie/business/technology/apple-eyes-expansion-of-key-irish-operation-31211337.html

https://electrek.co/2016/04/19/exclusive-apple-tesla-vp-chris-porritt-car-project/

https://biz.yahoo.com/p/314qpmu.html

https://biz.yahoo.com/p/330conameu.html